Wrongful, Constructive and Unjust Dismissal: What are the Differences?

At Sultan Lawyers, we address and work with employees that have separated from their employer in several different ways. Understanding the circumstances surrounding a separation is essential for ensuring an employee recognizes their options and entitlements when the employment relationship comes to an end.

Below is a list of the common circumstances that lead to a separation from an employer.

Without Cause Dismissal

An employer is entitled to terminate an employee’s employment “without cause” at any time and for any legal reason. However, when a dismissal takes place on a “without cause” basis, an employer is required to provide the employee with reasonable notice of the dismissal or pay them in lieu of notice.

A large portion of dismissals that occur take place on a “without cause” basis.

How much notice or pay in lieu of notice an employee will be entitled to at the time of dismissal will depend on factors including what, if anything, is stated in their employment contract. The Employment Standards Act 2000, specifies an employee’s minimum entitlements. In Ontario, an employee is entitled to at least one week of notice per year of service up to a maximum of 8 weeks. In some circumstances, an employee may be entitled to further payments under the ESA. This payment is called severance pay. Severance pay is provided as an additional week per year of service up to a maximum of 26 weeks. To receive a severance payment pursuant to the ESA, the employee must have been employed with the employer for at least 5 years and the employer must have a payroll in Ontario of at least 2.5 million dollars.

In addition to the statutory minimums described above, an employee may be entitled to common law “reasonable notice”. Common law reasonable notice is calculated based on a range of factors. While there is not a precise formula to calculate the value of the package, the following four factors tend to have a disproportionately large impact:

• The employee’s age;
• The character of the employee’s position and responsibilities;
• The employee’s length of service; and
• The availability of similar employment.

An employee who has been dismissed and given a severance package that is less than their entitlement has been wrongfully dismissed and may have legal recourse to recover their entitlements.

Dismissal for Just Cause

“Just cause” dismissal takes place when an employer terminates an employee’s employment based on serious misconduct. When an employee’s employment is dismissed for cause, the employer may be justified in not providing the employee with reasonable notice pay. In some cases, the employer may not even have to provide the minimum notice required under the Employment Standards Act, 2000.

Circumstances that have been found to form the basis for termination for cause have included, among other things:

• Breach of Trust
• Absenteeism
• Insubordination
• Dishonesty
• Harassment
• Misrepresentation at the time of hiring
• Incompetence

While any of the above conduct, in addition to other conduct, may be just cause for dismissal, each case of cause is unique and determined by an assessment of the particular facts. Courts will assess several factors including whether the alleged misconduct took place, the seniority of the accused employee, whether there had been prior warnings about the conduct, whether the misconduct had been tolerated prior to the dismissal and whether the misconduct caused a breakdown in the employment relationship.

Demonstrating just cause for dismissal can be difficult. It is not the employee’s job to disprove allegations of misconduct. The employer has the task of proving all allegations that they are relying on to justify a termination of employment for just cause.

If an employer is unsuccessful in demonstrating just cause, the employee will be entitled to wrongful dismissal damages which may include payment in lieu of notice, common law reasonable notice, and potentially other heads of damages.

Constructive Dismissal  

Constructive dismissal typically occurs in one of two ways. The first instance occurs when there is a single act of an employer that violates an essential term of an employee’s employment contract.

Examples of such acts may include:

• A significant demotion
• Implementation of a wage reduction
• An illegal layoff
• Relocating the employee’s workplace
• Imposing an unpaid suspension
• A significant change to the hours of work

The second instance occurs when there are a series of actions that, when combined, demonstrate the employer’s intention to breach the employment contract and no longer abide by it. An example of this includes a toxic work environment that is so poisoned that a person would not be expected to continue working there. This may include a workplace where an employer has failed to prevent workplace harassment.

If an employer is found to have constructively dismissed an employee, the employee will be entitled to a severance package.

If a severance package is not provided, or if the package is deficient, then the employee may be entitled to pursue damages consistent with wrongful dismissal damages, and depending on the circumstances, extraordinary damages.

Unjust Dismissal

While the terms wrongful and unjust dismissal are often used interchangeably, unjust dismissal, strictly speaking, applies to employees who are employed by federally regulated employers. Employers subject to federal regulations include airlines, banks, broadcasting, telecommunications companies, truck drivers and other shipping services.

Employees that have had their employment dismissed from a federally regulated employer may be entitled to file an unjust dismissal complaint under the Canada Labour Code. This unique remedy applies to non-unionized employees with at least 12 months of employment with a federally regulated employer. The employee will not have access to the unjust dismissal complaint regime if, for example, the employee was a manager, is covered by a collective agreement, or if the reason for dismissal stemmed from economic considerations such as lack of work or discontinuance of function.

An unjust dismissal complaint must be made within 90 days of the dismissal.

When filing an unjust dismissal complaint, one possible remedy is reinstatement to the employee’s previous position with the employer. However, reinstatement is not guaranteed. An adjudicator may, for example, decline to order reinstatement where it can be found that the working relationship between the employee and the employer has become untenable. Where unjust dismissal is found to exist, and an employer can demonstrate that reinstatement is untenable, an employee may be entitled to damages in lieu of reinstatement.

An unjust dismissal complaint is a unique option available for employees in a federally regulated industry. However, an employee does not have to pursue this method and may decide to file a wrongful dismissal claim seeking damages instead.

If your employment relationship has been severed and you are seeking legal advice with respect to your entitlements and your options, please contact Toronto employment lawyers, Sultan Lawyers at 416-214-5111 or here.